Commerzbank uses recovery to raise profit forecasts

Commerzbank today raised its profit forecasts after strong second-quarter results, underscoring the recovery trend among Europe's banks.

"We have always said that we will be profitable by 2011 at the latest," said chief executive Martin Blessing. "We now assume that in a stable market environment we will conclude 2010 as a whole with a profit."

Given the economic recovery the bank now expects risk provisions of up to 3 billion this year, below its earlier estimate of 3.8 billion.

In the last couple of days several of Europe's top banks have beaten earnings forecasts as bad debts shrank more than expected, outweighing a slowdown in investment banking, which was hit by sovereign debt fears.

Commerzbank again broke even in the second quarter. The net profit of 352 million was higher than the 100 million expected by analysts, but significantly lower than the 708 million booked in the first quarter.

Investment banking income was hit as activity slumped following Greece's economic crisis which threatened to spread and rattled investors.

But as Commerzbank has a smaller investment bank than big rivals Deutsche Bank, Goldman Sachs and Citigroup, the impact was less severe for the Frankfurt lender.

Trading profit came in at 337 million, up from the 71 million booked a year earlier, but down from the 850 million in the first three months.

Loan loss provisions fell to 639 million, down from the 993 million in the previous year and the 644 million in the first quarter.